NEW YORK (Reuters) — A surge in bets
that shares of Green Mountain Coffee Roasters would rise sharply by
the end of the week has raised suspicions, coming as it did just
hours before news of a partnership deal with Coca-Cola <KO.N>.

Green Mountain <GMCR.O> said late Wednesday Coca-Cola bought a 10
percent stake for $1.25 billion and would help launch Green
Mountain's new cold-drink machine, planned for release as soon as
October.

To be successful, many of the bets — call options conferring the
right to buy Green Mountain shares at a specific price before
midnight Friday — required the shares to rise to $90 or $95, roughly
a 12 percent to 18 percent increase over two days.

The shares, which closed at $80.88 on Wednesday before the
announcement, were up 26.5 percent at $102.29 on Thursday afternoon.
Earlier they traded as high as $110.50.

"We noticed the out-of-the-money ones which were definitely a bit
suspicious. To wait until the last minute before some sort of
announcement to buy something that expires so soon, that does raise
an eyebrow," said Ryan Detrick, senior analyst at Schaeffer's
Investment Research in Cincinnati.

A call option with a "strike" price significantly higher than that
of the underlying stock is described as being out of the money.

"It's safe to say that if they bought (the contracts) anytime
yesterday, they easily made over 1,000 percent near the open today,"
Detrick said.

The total volume of call options, which generally convey bullish
expectations for a stock, surged in Green Mountain on Wednesday,
jumping to 53,681 contracts from a recent daily average of about
13,000 contracts, according to options analytics firm Trade Alert.

The $95 strikes closed on Wednesday at 46 cents per contract. Since
one contract accounts for 100 shares of a stock, a purchase of 1,000
call options would cost about $46,000. Those options were trading on
Thursday at $10.10 per contract, which would make 1,000 calls worth
about $1.01 million.

Among the biggest open interest changes were in the $90 strike call,
which added 2,688 contracts to bring open interest to a total of
4,553 contracts, and the $95 calls, where volume of 1,695 contracts
brought open interest to 2,475, according to Trade Alert.

Suspicious activity in options market ahead of major announcements
is not new. While some of the bets could be pure speculation,
regulators have been increasing their surveillance of suspicious
action prior to big announcements.

The CBOE's Department of Market Regulation "does review unusual
trading activity on a regular basis," a CBOE spokesperson said, but
it does not comment on any specific situations. A spokesperson for
the U.S. Securities and Exchange Commission declined comment.

A spokesperson at Green Mountain did not immediately respond to
requests for comment.

In addition, the company reported earnings on Wednesday, and
expectations headed into the report was for a move of about 15
percent in the shares. Activity in bearish put options was also
greater than normal, according to Trade Alert.

"Green Mountain had earnings coming out and implied volatility was
high since earnings are a big deal anyway to the company," said
Brian Overby, senior options analyst at TradeKing in Charlotte,
North Carolina.

"But if something way out-of-the-money (contracts) were bought for
the open and weren't closing for anything, that is speculation."

In August, a former Green Mountain employee was charged by the SEC
with participating in an insider trading scheme, where bets would be
made using out-of-the-money options prior to earnings reports.